Posts Tagged ‘ deferred annuity ’

Senior Finances 101: Understanding Annuities, #2

Oct 7th, 2010 | By Sharon Shaw Elrod MSW EdD | Category: Senior Moments Blog

The first plan we are going to talk about in the SCJ series on annuities is the Single Premium Deferred Annuity. The SPDA is self-explanatory–you deposit a sum of money (single premium) in the policy and then wait until a later time (deferred) to withdraw the money. You and the insurance company agree in a contract (the annuity agreement) that you are guranteed a certain rate of interest for a defined time period. The time period can be anywhere from one to seven years. Your interest rate will depend on the length of the guarantee. As in any annuity, if you take money out before the agreement stipulates, you will be hit with surrender charges.

The attractive feature of the SPDA is the tax issue; you do not pay tax until you withdraw money, not even when the interest begins to add up in the policy. If you have money to invest, and are as sure as you can be that you